Offshore Funds in GIFT IFSC: Exploring Opportunities
GIFT City (Gujarat International Finance Tech-City), located at Gandhinagar in Gujarat, is emerging as a global financial hub, redefining the financial landscape in India. It is an initiative of the Government of Gujarat supported by the Government of India for the development of a greenfield smart city and IFSC (International Financial Services Center).
Headquartered at GIFT IFSC, Gandhinagar in Gujarat, the International Financial Services Centres Authority (IFSCA) is established under the International Financial Services Centres Authority Act, 2019. India's maiden offshore financial centre. The regulatory powers of RBI, SEBI, IRDAI, and PFRDA have been vested in IFSCA for regulating financial institutions, products, and services in IFSC at GIFT City. It is a special financial jurisdiction in India that allows investors to conduct foreign currency transactions with ease.
GIFT IFSC is home to multiple services, to name a few - capital market, banking services, fintech companies, startups, and offshore asset management. It is designated as a Special Economic Zone (SEZ) and offers incentives to attract foreign investors and financial institutions. This includes tax benefits, regulatory ease, and world-class infrastructure that is a blend of sustainability and technology.
One of the key attractions within this ambitious project is the establishment and operation of offshore funds. In this blog, we will underline the significance of offshore funds in GIFT IFSC, as well as the numerous benefits that they bring to the table for investors looking to strengthen their portfolios.
Understanding Offshore Funds In GIFT IFSC
Being the new-age financial hub, GIFT IFSC is an ideal destination for establishing and operating offshore funds. These funds pool money from investors and invest it in a diversified portfolio of assets such as stocks, bonds, real estate, and more. The funds provide investors with diversification, asset protection, and potential tax advantages.
The funds in GIFT IFSC are regulated by IFSCA under Fund Management Regulation. As of March 31, 2023, there were 65 FMEs (Fund Management Entities) registered with IFSCA, these FMEs have collectively raised commitments of more than USD 13 Bn across different types of schemes. A brief snapshot of several schemes approved and commitments raised by them as of March 31, 2023.
Key Advantages of Offshore Funds in GIFT IFSC
1. Tax Benefits:
One of the primary attractions of offshore funds in GIFT IFSC is the favorable tax treatment they receive. The Indian government has introduced tax incentives to encourage the establishment of these funds at GIFT IFSC. Funds in GIFT IFSC provide a competitive tax regime compared to treaty jurisdictions like Singapore and Mauritius, in addition, there is a tax certainty and benefit on both direct and indirect taxes. These tax benefits can significantly enhance the returns for investors.
2. Ease of Registration:
The regulatory framework in GIFT IFSC is designed to streamline the registration process for offshore funds. This results in faster approvals, reduced administrative burden, and quicker entry into the Indian market.
3. Reduced Compliance Costs:
The regulatory regime in GIFT IFSC is designed to reduce compliance costs for offshore funds. This includes simplified reporting requirements and streamlined procedures for fund managers, making it easier to operate within the city.
4. Access to Indian Markets:
Offshore funds in GIFT IFSC can access Indian financial markets, providing global investors with an opportunity to tap into the rapidly growing Indian economy. This access is facilitated through simplified regulations and a dedicated trading platform within GIFT IFSC.
5. Currency Diversification:
Offshore funds in GIFT IFSC are typically structured to attract foreign investments. The most important benefit of offshore funds is that they can operate in multiple currencies, making it easier for investors to manage currency risk and allocate investments based on their preferences and strategies.
6. Asset Protection:
GIFT IFSC offers a robust legal framework that protects the interests of investors. The regulatory authorities are committed to ensuring the security of investments and maintaining market integrity.
7. Global Connectivity:
GIFT IFSC's strategic location and world-class infrastructure make it a well-connected hub, attracting financial institutions, fund managers, and investors from around the world. This global connectivity fosters collaboration and knowledge sharing among market participants.
8. Regulatory Framework:
In April 2022, the IFSCA has notified IFSCA Fund Management Regulation, 2022. These regulations provide a comprehensive framework for asset managers and funds to operate in GIFT IFSC. These regulations are in line with global best practices with a focus on ease of doing business. A brief snapshot of the fund regime in GIFT IFSC is provided below-
Invest In Offshore Funds In GIFT IFSC
Alchemy Investment Management LLP is one of the registered FMEs in GIFT IFSC and also one of the first entities to migrate funds from offshore jurisdiction to GIFT IFSC representing a step forward in the country’s goal of becoming a global financial hub. Our investment management services are offered in both Comingled Funds and Separately Managed Accounts. Here is a glimpse into our offerings:
1. Comingled:
An investor who is looking for actively managed Indian exposure can invest through Alchemy’s pooled investment vehicle. The vehicle is a private investment fund, which offers interest to qualifying global investors (eligible investors), through its fund. The portfolio is managed via a long-only equity strategy and the objective is to generate absolute returns over a market cycle.
2. Separate Managed Account (SMA):
Alchemy Investment Management LLP is open to providing its portfolio management and advisory expertise to a Separate Managed Account (SMA), where the long-term objective of the investor matches with our investment philosophy. These SMAs are offered to high-net-worth individuals, and institutional investors like Sovereign Wealth Funds, Pension Funds, Endowment Funds, Mutual Funds, Country Funds, and Fund of Funds.
This blog is for informational purposes only and should not be considered as an offer or solicitation to buy or sell any securities or make any investments. We recommend readers to take independent advice before taking any investment decisions. Please refer to our Disclaimer and Disclosures for more details.